A Case or Two or Three For Floating Power Plants

1. Floating Power Plants: Challenges with power

In March 2011, an earthquake-generated tsunami devastated large lengths of the region’s coast. The disaster caused a meltdown at the Fukushima nuclear power plant, with Japan’s reaction being the shutting down of all of its nuclear reactors. Until then, nuclear supplied nearly one-third of the country’s electricity needs, which had to be taken over by oil and gas generation to sustain the low supply levels. Ironically, the mountainous island nation had few locations for fossil-fuel power plants safe against earthquakes and tsunamis, so this was not a feasible option for the country. Moreover, people don’t want to have a power station in their backyards, and backyards in Japan are small. The country faced clear challenges.

Closer to home in Africa, power generation is arguably the biggest problem holding the continent back in its quest for growth and development, resulting in a vicious cycle of low investment, little public spending, poor growth, little job creation resulting a low tax base for governments to attract further investment. In general, power generation capacity in Africa is small, and numerous problems are caused by old and ageing infrastructure as well as large maintenance backlogs. These issues continually result in power supply interruptions that damage GDP and hinder economic development. Part of the problem in increasing capacity is time to get power projects producing power; delays in land acquisition, approvals, environmental challenges and a host of others result in low power generation capacity.

With the enormity of its hinterland in the arctic regions under its possession, Russia has been battling with the provision of power in numerous locations where large power plants are either too difficult to build, too expensive or not needed for long periods. Their main objective is the provision of power for oil and gas exploration. Other objectives include the supply of electricity and heat to the most remote regions, with the main objective of supporting growth and sustainable development.

2. Overcoming the challenges with Floating Power Plants

There are power supply issues in many parts of the world in various contexts. Floating power plants (FPP) offer a means to solve these problems in the first and third worlds. Placed in a marine environment, they don’t need land. They can be plugged into local grids, and from the point of arrival of the FPP at the site, they can provide power within weeks, far quicker than land-based power plants. By their nature, they are temporary and are highly advantageous in instances where short-term demand exists. Cost-benefit analyses work in their favour, but only under very specific circumstances.

Furthermore, the demand for their services is growing. According to a new report by Market Research Future (MRFR), the global floating power plant market is projected to experience growth at a rate of 10.3% from 2017 to 2023. Factors driving the market demand include rising populations, rapid urbanization, rising demand for uninterrupted power supply, and lack of adequate lands to construct renewable energy plants. They estimate the market size to be USD 1,7 billion by 2023. Today, over 100 FPPs are deployed and operating around the world. The utilization rate of floating power plants is around 95%, with only one or two power barges available in the global market at any time. There is no oversupply of FPP’s, which indicates a potential for profitability from the FPP operator’s business perspective.

3. Technical aspects of Floating Power Plants

The capacity of individual ships and barges ranges from 45MW to 500MW. They can be run off various fuels, including LNG, LPG, diesel, HFO and others, depending on the plant installed onboard. Current designs for new builds include fuels such as petcoke and nuclear fuels. This variation in fuel types makes them ideal to match fuel requirements with the host country’s. Owing to the high demand for low-cost flexibility, floating power plants have seen a resurgence since their early days. Developments on the horizon suggest the future fleet could be far more diverse and include nuclear plants, combined cycle gas turbines, and liquefied natural gas (LNG) facilities. The use of LNG has cost advantages of other heavier fuels and emits fewer greenhouse gasses than coal and heavy oil. This is an advantage for some countries. Some FPP are equipped with fuel storage onboard to maintain generation availability, which is arguably the most important attribute FPPs can have. The power plant would be operated similarly to any land-based combined-cycle generating facility, with onboard operators performing similar functions. The multiple turbines, gas compressors, and transformers built into the design provide a high degree of redundancy, which increases electricity availability. LNG FPs can be coupled with or equipped with onboard FSRUs. FSRUs have serval advantages over land-based regasification and storage facilities, namely faster to market, more flexible, and, In most cases, more cost-efficient. Again, the selection of the right piece of plant is very dependent on the client’s needs and the location. Small FSRUs, suitable for the application of FPP, are becoming more available today.

4. The Business and market for Floating Power Plants

There are several new builds currently underway, a large number of which have nuclear-generating capability. China and Russia seem to be leading the way on the nuclear front. There are fewer new builds with fossil fuel generators. In June 2019, Kawasaki obtained approval in principle from DNV GL a newly developed LNG floating power plant based on its 2018 “Gas Power Plant” rules. Chiyoda is currently offering LNG-powered floating plants in the small-scale range using a Gas/Diesel dual-fuel engines as well as a larger mid-scale Gas Turbine combined cycle. The technology appears then to be improving. Costs for nuclear driven FPPs are in the order of US$250m – US$450m for 50-150MW installed capacity, while costs for fossil fuel-generated FPPs are approximately 50% more expensive.

In some instances, existing ships are converted into FPPs. There are cost advantages, which are overshadowed by longer construction timeframes. Converting a bulk carrier into a power station is a major undertaking and involves, among other extensive works, placing several generators into the cargo hold. Surveyors verify the conversion process, trials and testing phase, which enables them to deliver certification to applicable classification rules. FPP lifespans are generally between 25 and 50 years, with a payback period of between 4 and 12 years. Financially, they provide reasonable returns to owners. In general, FPP’s are more expensive than other forms of electrical generation, hence cost per kWh is usually not their strong point. However, in certain instances, it is far cheaper than building large power stations in remotely accessed areas, specifically where either short-term or immediate solutions are needed.

5. Site Selection and Engineering Aspects:

Where their a long-term demand for a constant power supply, the FPP will be permanently located at one site over usually up to 3-5 years, in these circumstances, the facility will have a power purchase agreement between the FPP owner and the client. FPP owners sometimes rely on the threat of moving their barges to another country as a means of extracting payments from customers who are reluctant to pay, which gives incentives to keep the contract alive for both parties.

FPPs can be permanently moored alongside wharves, jetties, and quays and, while still being floating vessel, will not move from this location. Such barges are, therefore, exposed to wave movement and potential impact from other vessels. Several studies can be undertaken to determine the movements of the vessels under the wave and current action, as well as the requirements for moorings and the mooring specification. In some instances, special moorings have been created where the FPP is protected from passing marine traffic. An example of a special mooring is where a permanent “wet berth” is created with a locked gate enabling the power barge to be floated into the mooring; a dock is excavated, the barge is floated in and then sealed off from the watercourse, water is pumped out, and the dock is filled to create a permanent land-based generating station, which can be refloated in the future and relocated to another site. The water level within the perimeter is then maintained to protect the barge from fluctuations.

The surrounding structure also protects from the impact of other vessels. This setup achieves a more stable operating environment than, say, floating within a harbour basin and eliminates most of the insurance risks of ‘perils of sea or water’. Most FPs in operation today are power barges and, as such, do not have their propulsion systems. These, of course, would have to be towed to the site. The selection of the power plant’s location also has to consider other factors such as fisheries, mariculture, and main shipping lanes.

6. The Rationale for Floating Power Plants

Rather than providing advantages and disadvantages to support the case for FPPs, decision-making is driven very clearly and simply by one of the following three key requirements:

1. Difficulties in acquiring suitable land for land-based plants
2. Short-term and rapid increase in power demand
3. Short-term and rapid decrease in power supply
4. Secure, cheap and long-term fuel source.

The case for FPPS seems, therefore, to be a very simple and strong one in the right circumstances. However, in our imperfect world, there are challenges to be overcome:

1. Fuel may not be designated as an approved fuel source in the country’s integrated resource plan due to high levels of carbon. New mandates outlining the demand for clean energy sources and the implementation of energy efficiency standards in industries are likely to elicit the floating power plant market demand over the forecast period. In these instances, however, LNG and LPG are cleaner alternatives than diesel and other HFOs. Also, the FPP can be selected appropriately so that it can run off the preferred fuel source.
2. In some cases, feeding into local power grids is severely challenged due to old, obsolete substations and other electrical infrastructure. However, with the right expertise, this can be overcome through technical means.
3. High new build and conversion of vessel costs may act as a growth deterrent. This is, however, substantially downplayed when the need for interim emergency power supply becomes a huge GDP growth impediment.

These challenges have been overcome in each country where FPPs are currently operational. FPPs, therefore, lend themselves to solving several serious problems. The case for FPPs is clear: operators can make profits while countries can obtain solutions to highly specific power supply problems.

< BACK TO ARTICLES